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Party Over, Out Of Time?: Debate Over Web Stks Rages Online
By Maria V. Georgianis
NEW YORK (Dow Jones)--Online message boards and chat rooms are abuzz with predictions of an early 1999 correction in the meteoric Internet stock sector, but faithful Web-stock fans steadfastly argue that the party isn't over.
Touting bullish holiday-sales surveys and predictions by online retailers, some message board participants are even urging investors to continue buying Internet stocks, many of which have hit lofty heights in recent weeks.
Their zealousness is driven by the belief that the Internet will become a significant venue for commerce, and the dominant vehicle for communication and entertainment.
But some financial experts have suggested that Internet stocks will fall early next year on profit-taking, and as valuations in the sector come down. Any letdowns in fourth-quarter results - or in first-quarter 1999 revenue - could also burst the bubble.
Some online chatroom participants are drowning out their negativism, saying that the more people believe that Internet stocks will fall, the less likely they will.
"The market does its best to fool the majority," a posting by Anindo Majumdar on a Yahoo Inc. (YHOO) message board on the Silicon Investor financial Web site, said.
Others are betting that the fourth-quarter results - which for most Internet companies means revenue growth, not profits - will turn the bears into bulls. Such was the predominant sentiment early Thursday on America Online Inc.'s (AOL) "Market News" message board.
"The market will no doubt be volatile in 1999, but I have heard more analysts predict the Internet segment will continue its upward trend in 1999," said "Lionheart," a participant on Silicon Investor's AOL message board.
The investor gushed about AOL's report Wednesday that it had 15 million members to its online service. The service had 14 million members on Nov. 12. AOL said more members joined on Christmas Day than on any single day in its history.
Internet stocks are trading flat Thursday, even with AOL's addition today to the S&P 500 stock index. But some chat-room members see a major selloff early next week.
Since Dec. 21, a contest on Silicon Investor has asked participants to predict when and why a 40% correction in the space of five consecutive trading days will occur in high-flyers Amazon.com Inc. (AMZN), Yahoo! Inc. (YHOO), eBay Inc. (EBAY), America Online and CMGI Inc. (CMGI).
The contest, started by a self-described New York fund manager using the alias "Auric Goldfinger," promises a $5,000 cash prize to the winner. The contest is known as the "Tulipomania Blowoff."
Some contest participants are predicting a collapse as early as Jan. 4, the first trading day after the New Year's holiday. Others believe it will happen within the month.
Triggering the tumble, some are suggesting, will be insiders and large investors selling to lock in profits before the bubble bursts, which in turn will set off trading by retail investors. Some bulls suggest that the lower prices will actually spur further demand.
"Having a big position in these stocks early in the year is way too risky," said "The Guru," a participant on the Yahoo message board on Silicon Investor. "Having it (on the last trading day of the year) is good because they will look smart when the annual reports are printed," the guru said.
Another reason suggested for the crash is that people are getting tired of the Internet stock frenzy that has swept up companies that aren't even related to the Internet. A press release touting a new Web retail site, in some cases, has been enough to send a stock soaring.
"Esecurities," a participant on the Tulipomania message board, suggested that the increase in the supply of Internet shares will put an end to Internet mania. Currently, many Internet stocks' volatility is driven by their thin float or limited amount of publicly traded shares.
"Every day more and more of these companies go public, have stock splits, etc., and slowly there will be enough and demand will fall," esecurities wrote on the board.
Some suggest a sinister reason for an Internet sector collapse - that the Securities and Exchange Commission will halt trading of some questionable Internet companies.
The correction isn't expected to affect all Internet stocks equally and at the same time. Some financial experts have suggested that first-tier stocks such as Amazon, Yahoo, eBay and AOL will see a slight correction of no more than 20%. But second-tier companies will be a mixed bag.
"It will not collapse from the top," said "Hiram Walker" a participant on the Tulipomania message board. "The last three Internet stocks to go down will be AOL, Yahoo, and Amazon, all the others will be dust by then," Walker said.
Even some ardent fans of the sector are having second thoughts about it continuing its bull run. "NickNameo," a self-described new AOL shareholder on The Motley Fool financial Web site, said he's trying to stay grounded.
"At some point we have to accept that AOL (being) up 400% in four months, other stocks (being up that much) in one or two days, is an anomaly that will end," he said.
- Maria V. Georgianis; (201) 938-5244;
maria.georgianis@cor.dowjones.com. |
